The recent downtrend on AUDJPY could be over soon, as the pair formed an inverse head and shoulders reversal signal on its 1-hour time frame. Price is currently testing the neckline around the 85.00 major psychological level and an upside break past the resistance could confirm the potential uptrend.
The pattern is around 300 pips tall so the resulting rally could be of the same size. However, if the 85.00 handle holds as strong resistance, price could soon fall back to the previous lows at the 82.00 mark or until the area of interest around 83.50.
The 100 SMA is still below the 200 SMA, which means that the path of least resistance is to the downside. Stochastic is on the move up, reflecting enough buying pressure to trigger a test of the neckline, while RSI is on middle ground.
AUDJPY Fundamental Factors
Earlier today, Australia released its August jobs report and indicated that 17.4K jobs were added during the month, higher than forecasts of a 5.2K increase. This brought the jobless rate from 6.3% to 6.2% in August while the participation rate showed an improvement from 64.9% to 65%.
However, Chinese inflation data came in mixed, with the headline CPI climbing from 1.6% to 2.0% in August and the PPI hinting of weaker price pressures in the coming months. The PPI showed a 5.9% tumble, worse than the projected 5.6% decline and the previous 5.4% drop.
The Japanese yen has been much weaker against its forex counterparts this week, after Prime Minister Abe shared plans to hike the corporate tax next year. This could have a similar impact as the sales tax hike but take its toll on the business sector. Meanwhile, a BOJ official pointed out that further easing could be possible.
With that, the path of least resistance is to the upside for AUDJPY in terms of fundamentals, as Australia is showing resilience while the Japanese economy could see another round of easing.
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